A tool for credit that transcends history

May 18, 2015

Credit cards have been part of our lives since 1980, although nowadays it is hard to believe that they haven´t always been there. True, credit cards are only a few decades old in the form in which we know them now.

The first credit was given in agricultural societies. Rural communities needed credit to buy seed and supplies, as well as food for the year while waiting for their crops to grow. Basically all shops in a rural agricultural community had some kind of credit that was issued to those farmers who had to wait for their crops to grow and take in the harvest before they would have cash. Once these farmers had the earnings from selling their grains, they were able to pay back the shopkeepers that had extended them credit. Then, the farmer’s credit account was restored.

As more people moved to cities and cities started to grow the idea of credit quickly took hold in cities. Credit use expanded together with the movement of people to city living. Soon the city stores had their own accounts of credit as well. Some stores were early pioneers in this movement, e.g. stores like Bloomingdales were early adopters of credit accounts. In the earliest days, the store’s register carried in cartons with numbers associated with accounts. Later this practice was replaced with metal plates that were similar to dog collar tags. These early credit accounts were typically settled at the end of the month, so that so long as the outstanding balances were paid each month the cycle could be repeated each month.

The first examples of the modern credit card first appeared in 1949 and was known as the Diner´s Club card. Diner´s Club cards were accepted in many different places, but were most popular in restaurants. As more and more stores started accepting Diner’s Card, they saw their sales and earnings increase dramatically and the acceptance of credit cards become more common and widespread. Despite the fact that it was accepted in multiple places, Diner´s Club card was still really a charge card, so balances were not expected to be carried over month-to-month, but rather payment at the end of the month was expected and necessary to continue its use.

In the 1950's the banks issued their own credit cards, but laws on inter-State loans made it difficult to have a single card that could cover more than one state. Other earlier credit issuers were Travelers who had credit accounts or credit cards at many different places. Finally, in 1976, MasterCard was introduced as a joint effort between several banks and many of these obstacles were overcome.

Over time, the government began to deregulate banks and the credit card market became more competitive. Later systems such as the introduction of points and rewards occurred in the 1990s and this really attracted mass consumer adoption and credit cards really took—off.

Today, the monitoring of credit cards is much more widespread than it was in its beginnings and there are reforms which regulate its use and widespread legislation controls many aspects of modern credit cards.

All these developments around credit cards has helped families have more control over the form of use and consequences of credit cards making them increasingly more like a tool of credit that has an ascendant history.